Housebuilders

Lord McKenzie of Luton Excerpts

Thursday 11th January 2018 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, I congratulate the noble Lord Best, on securing this debate and the usual forensic manner in which he has introduced it.

It is fitting that we should focus on the performance of private sector housebuilders at a time when the headlines in the financial press, to which the noble Lord referred, are all about obscene bonus payments by way of share options to executives of Persimmon whose performance has benefited directly from the Government’s Help to Buy scheme—a performance where completions of the majors rose by 48% over the period, but profits by 10 times that rate of increase. That juxtaposition could not be more cruel when put against the desperate plight of the homeless and rough sleepers—whether in Windsor or Luton, Westminster or Lambeth.

We have a housing crisis in this country every bit as bad as the challenges facing the NHS, and one which requires a long-term sustained approach to tackle. Characterising this as fixing a broken housing market is inadequate because it implies that market mechanisms alone can produce the solutions. Not only do we have a growing homelessness and rough sleeping problem, we have sky-high property prices, making it impossible for many to rent or buy, with the dream of home ownership disappearing from the agenda. As the Shelter research, which was shared with us for this debate, sets out, a new-build house is out of reach for eight in 10 working, private-rented families across the UK.

We have had profound housing crises before. At the end of the Second World War, new build had all but ceased, extensive repairs were needed to address bomb damage, materials and labour were in short supply, and by 1950 government debt was over 200% of GDP. By comparison, today’s environment looks positively benign. Yet the Government of the day made the building of new homes—albeit that some were temporary prefabs—a priority. Between 1945 and 1955, government—first Labour and then Tory Governments—delivered 1 million council homes, including new towns such as Milton Keynes and Cumbernauld.

If one looks a little closer to the present, in 1969-70, 378,000 houses were completed in the UK. The UK numbers for 2016-17 were 178,000—about half. In 1969-70, about half the completions were clocked up by private enterprise, a few by housing associations, and about half by local authorities. The provision of substantial social housing is the one feature over this period that enabled overall housing numbers to maintain levels needed to meet demand. The curtailment of local authority provision at the end of the 1970s was never compensated for by placing the onus on housing associations.

So much for the past—what is to be done in future to address the housing crisis? Four minutes does not allow time to critique the entirety of the February 2017 Fixing Our Broken Housing Market White Paper. Nor does it help just to trot out the line that we need to build more houses. Of course we do, but the issue is how and, particularly today, how far we can place reliance on the major housebuilders to play a more significant role. How can we push back against the growing market concentration and prices for land, which edge ever upwards? Certainly, a greater role for local authorities and housing associations should be a catalyst for supporting new and smaller firms into the housebuilding sector.

As for major housebuilders, the analysis provided by Shelter seems to pinpoint the particular problem: they have a speculative business model whereby they buy the land and build homes without knowing who they will sell to and at what prices. This competition for land prices pushes up prices, squeezes out smaller builders and pushes down on development costs and infrastructure provision, affecting the quality of housing provision. If we are to get public benefit from the activities of private sector builders, Shelter prescribes the need for stronger powers for public bodies to masterplan, and powers for development corporations to assemble land and act as master developers. We agree. As the noble Lord, Lord Best, said, what is certain is that a national strategy that relies on the private market sector as currently constituted will not be able to achieve the sustained uplift in housebuilding that the country so desperately needs.